Broadband Growth Will Come From New Tech, Not New Adds

Broadband growth in the U.S. has slowed considerably in the last two years and future growth for online access technologies will come less from people adopting broadband for the first time and more from people upgrading from one technology to another, according to a report out today from Forrester. In addition to new technologies, Americans will also see speed boosts — even those on the slower service tiers — as providers attempt to offer more value on the low end rather than lower prices.

For many, the elimination of the 768 kbps or 1.5 Mbps connection options will go unnoticed, but for those that really only use email, a price decrease for barely broadband speeds will be welcome indeed — it could even spur a few laggards holding out on broadband because of pricing to step up. However, the big takeaway of the report is that most of the U.S. — at 80.9 million homes — has some access to broadband, and that such access will continue to improve.

When it comes to ISPs, subscriber growth will only help drive sales through the next two years; after that, revenue growth will have to come from new technologies, services and pricing schemes. Cable companies so far are winning, with 45 percent of homes expected to be subscribing to cable broadband by the end of 2009, but fiber to the home will make the most gains over the next five years, by which time it’s projected to grow to account for 10 percent of all access technologies from just 4 percent. And during that time, alternative wireless technologies aren’t forecast to be competitive to cable, fiber or even DSL.

While the speed boosts are welcome, I think the report needs to spend more time discussing how to make broadband access a differentiated service, beyond price and bundles. It recommends that providers focus their competitive strategies less on a bundle and more on access to online storage, TV Everywhere and in-home entertainment that require higher speeds, and help keep subscribers from switching. The irony, of course, is that such high-bandwidth applications are apparently the same ones leading providers to cry uncle under an onslaught of heavy usage.